UniCredit improves Serbia's 2024, 2025 GDP growth f'casts

UniCredit also upgraded its gross domestic product (GDP) growth estimate for Serbia in 2025 to 3.6% from the previously predicted 3.1%, it said in its CEE Quarterly economic report published on Wednesday.

"We anticipate a favourable economic environment for Serbia in 2024 and 2025. Serbia will likely be an outperformer in terms of fiscal performance in the region, with a fiscal deficit of 2.2% of GDP in 2024 and 1.5% of GDP in 2025," the banking group said.

UniCredit noted that Serbia's current account deficit will continue to be financed by foreign direct investment (FDI) this year.

At the same time, inflation is expected to fall below the 4.5% upper bound of the central bank’s target range in the first half of 2024, prompting the central bank to start cutting interest rates from June.

UniCredit said they expect consumption to become the main driver of GDP growth in 2024, with growth picking up from 0.8% to 3.0% as disinflation and wage increases boosts real income and financial conditions start to ease. The minimum wage increased by 17.8% in January, public-sector wages increased by 10% and pensions by 15%, the banking group noted.

"Investment growth is also likely to pick up. Public investment is planned to increase by around 7% in nominal terms to around 7% of GDP, mainly due to the implementation of infrastructure projects. Private investment growth is expected to accelerate, supported by strong FDI, easing financial conditions, and a recovery in exports in the second half of the year," UniCredit said.